Why Employee Happiness Is the New Engagement (And How to Measure It)

Why Employee Happiness Is the New Engagement (And How to Measure It)

All good managers want employees to be satisfied.

Yet, many employees are not satisfied.

Research has shown that 48% of employees are either “unhappy” at work, or only “somewhat happy.”

This is a big problem.

High employee satisfaction is correlated to lower staff turnover and higher job performance.

At a time when employee loyalty is at a low, companies need to focus on raising employee satisfaction in order to retain their top talent.

This is an area that’s been heavily studied, and in this article, I’ll walk you through some of the advice from the best studies to show you:

  1. How to measure employee satisfaction effectively.
  2. How to identify areas to improve.
  3. How to implement solutions that will increase employee satisfaction.

But before we dive into that, let’s first clear up an area that can cause confusion.

The correlation between employee engagement and employee satisfaction

The term employee engagement is often used interchangeably with employee satisfaction. This is a mistake. Employee engagement is a broader, multidimensional concept that includes employee satisfaction among other measures.

Employee satisfaction, on the other hand, depends on factors related to the work conditions of everyday life at work, including the benefits and compensation the team members receive in return for their time and work. There may be parts of the job that employees are not happy with, but other parts they enjoy; so if you want to ensure you have a highly motivated team, you need to know about both sides.

Why measuring and using employee satisfaction is tricky

Figuring out if an employee is satisfied is a lot harder than just asking them, “Do you like your job?

It’s too broad a question, and as we mentioned above, employees can be satisfied with some parts of their job, but not others.

Another challenging aspect of assessing job satisfaction is that every employee has a different personal definition of satisfaction.

Some aspects of employee satisfaction are completely out of your control as an employer.

So how should you measure satisfaction?

The best way is to use a combination of metrics to gain a more complete picture of why employees are or are not satisfied.

Let me break down what those metrics are in the next section.

How to measure employee satisfaction, step-by-step

There’s no single way to measure employee satisfaction, but the most accepted approach is to use an employee satisfaction index (ESI).

Some confusion can arise here because there are multiple methods used to calculate the ESI value.

The best method for your organization depends on:

  • The number of employees you have.
  • How much time you can commit to this process.
  • The importance you place on having satisfied employees.

There are two general methods that are most commonly used as ways to measure employee satisfaction.

If you have a small team, or just want a quick employee satisfaction check, use Method 1. If having satisfied employees is more important to you, or if you have a team focused on culture and engagement, use the more in-depth Method 2.

Method 1. Fast and Easy: The 3 Question ESI Survey

To take this approach, ask all your employees to complete a questionnaire with the following 3 questions (or close variations):

  1. How satisfied are you with your current workplace and job?
  2. How well does your workplace meet your expectations?
  3. How close is your current workplace to your ideal workplace?

Ask them to score each question on a scale from 1 to 10, with 10 being perfect.

To calculate an employee satisfaction score, use the following formula:

Employee satisfaction index formula

This will give you a score out of 100.

All this score tells you is whether you have any major employee satisfaction issues, but it doesn’t tell you much else.

The limitation with this method is that the questions are still fairly broad, which makes it hard to know what action to take based on the results.

However, you can use this as an initial test. If you get a low score, then it makes sense to invest more into the next approach.

Method 2. In-Depth: The 7 Category ESI Survey

If you can, this is the best method to use to measure employee satisfaction.

It’s more all-encompassing and generates actionable data compared to first method above.

Again, ask your employees to complete an employee satisfaction survey. While there is a number of factors that affect employee satisfaction, here we will look at 7 specific categories, chosen based on research in this field.

The survey comprises a number of questions under each of the 7 categories.

Here are the 7 categories and a brief explanation of each one:

  • Extrinsic rewards – Tangible rewards given to employees (salary, bonuses, etc.).
  • Supervisory support – How happy an employee is with their boss’ performance.
  • Reward fairness – How appropriately rewards are distributed among employees.
  • Autonomy – How much freedom an employee feels they have in how they do their job.
  • Corporate image – How much the employee likes the company. 75% of American employees care a great deal about the image and performance of their employer.
  • Affinity – How supported an employee feels by other employees.
  • Development – How satisfied an employee is with the career prospects and opportunities the company provides them.

Note, these don’t all contribute equally to employee satisfaction, but taken together, they make up a significant percentage of it.

In this questionnaire, a 10-point Likert scale (example shown below) is also used, ranging from strongly disagree to strongly agree.

likert scale - employee satisfaction survey

The goal is to measure each aspect with 2–4 individual questions so that you can gather sufficient data to act on.

The statements below are those asked in each category in the research conducted. You could use the same or alter them to fit your business better. You can also pick questions from an employee satisfaction survey template we have created, which you can download for free for your own use.

  • Extrinsic
    • In general, I am satisfied with my compensation package.
    • In general, I am satisfied with the additional benefits, including insurance and bonuses.
  • Supervisory support
    • My administrator can be relied upon when I have job-related problems.
    • My administrator is available to listen to job-related problems.
    • It is easy to talk to my supervisor when I need help.
    • I am satisfied with the overall support from my supervisor.
  • Reward fairness
    • Employees are held accountable for their performances with fair performance reviews and treatments.
    • I am compensated fairly for the work I do.
  • Autonomy
    • I can control the scheduling of my work.
    • I have significant flexibility in how I do my job.
    • I have considerable opportunity for growth and improvement.
  • Corporate image
    • I am proud to work for my company.
    • I relate to the values of the company.
  • Affinity
    • When things get tough at work, I can rely on colleagues for assistance.
    • It’s easy to talk to colleagues when I need help.
    • Colleagues are always willing to listen to job-related problems.
  • Development
    • I am satisfied with the promotion or career advancement opportunities available.
    • The company provides a suitable learning environment to help employees grow.
    • The company helps employees grow as well as develop their potential.

These statements are not set in stone, although they were based on previous research. For example, the 4 statements used to measure supervisory support above are based on research by Currivan and Lee.

If a particular category is important to you, add more questions to explore it in more detail.

How to create and use the ESI questionnaire

Ask employees to fill out the ESI questionnaire — either physically (on a card or sheet of paper) or electronically (e.g., using quiz software like SurveyMonkey).

The most important aspect is that the surveys must be anonymous if you want honest answers.

Keep the instructions simple, but make sure they are clear to employees.

Most research studies that employ an ESI approach also don’t make it mandatory for employees to complete it. This is mainly so that employees who are too busy or for some reason aren’t invested in the task won’t skew the results with rushed or inaccurate answers.

The most important aspect of this testing is that this is not a one-off procedure. You should ask employees to fill out a questionnaire every 6 months. In this way, you’ll be able to keep your finger on the pulse of employee perspectives. More importantly, you can measure if employee satisfaction is going up or down over time.

How to improve employee satisfaction — Here’s what the research says

Just asking your employees to fill out a survey doesn’t do anything by itself.

Assuming you used the second, more in-depth approach, you then need to analyze the results to tell you which areas need more attention than others.

Start by Calculating the Average, and Consistency Values

For each statement you asked employees to rate, you should calculate two values.

First, the average.

The employees’ answers all correlate directly to a scale out of 10. You can leave it like this or multiply all the scores by 10 if you find it more convenient to work with scores out of 100 (or to get the values in percentages).

Add up all the responses to each individual question and divide by the number of employees who submitted a response.

Second, calculate the internal consistency (variance) value.

The simplest way to do this is to use the variance formula – VAR.S(select data) in whichever spreadsheet software you use and prefer.

In MS Excel the process of calculating variance using the formula above would be similar to the example below –

How to Calculate Variance In Excel

Next, Identify Trouble Areas

You should have a spreadsheet or a table that looks something like this:
calculating variance
And so on, for each question you asked in your survey.

These two values you calculated for each category can tell you a lot.

Employees that are very satisfied (in the best workplace possible) will score average values of at least 9 out of 10 for most the categories.

You don’t need to aim that high necessarily, but if the average for any one question is particularly low, it should be addressed.

What does the variance tell you?

The variance tells you how consistently different employees felt about each question. A high variance value would indicate that there are less opposing viewpoints between employees. A lower score would indicate that many opposing viewpoints exist among your employees.

For example, for the first extrinsic rewards question in the table above, the variance is relatively high. Even though the average value is high (9.3, meaning that overall most employees are very satisfied), the variance indicates that some employees felt very differently.

Let’s recall again that statement 1 was “In general, I am satisfied with my compensation package.”

The high variance means that a few employees are quite unsatisfied with their compensation package.

A low average score or high variance are both red flags that you should address.

Finally, Solve Your Problem Areas to Increase Employee Satisfaction

This is where it gets more complicated because your issues will be specific to your employees and workplace. The problem may be immediately clear, or you may need to investigate further with an additional, more specific questionnaire.

Here are a few examples of how you could solve certain problems if you saw that scores were low in those areas.

  • Statement: In general, I am satisfied with my compensation package.
    • Solution: Pay more or find a way to offer more extrinsic perks if giving raises is not possible.
  • Statement: My administrator is available to listen to job-related problems.
    • Solution: Find out why administrators don’t have time to listen to employees’ problems, address any roadblocks, and make time within the weekly schedule for review processes.
  • Statement: I am proud to work for my company.
    • Solution: Find out what about your company doesn’t align with your staff, or what is causing discomfort. If it makes sense, you can start culture- or value-building initiatives like volunteering as a group, or find ways to deliver more visibly on your company’s mission.
  • Statement: It’s easy to talk to colleagues when I need help.
    • Solution: Carry out more team-building activities to build affinity. As we’ve mentioned before, remote (and really, all) teams benefit from open communication channels and even formalized company policies around methods of communication. For example, if any one Slack conversation has 10 or more messages back and forth, institute a policy to hop on a call at that time.
  • Statement: The company helps employees grow as well as develop their potential.
    • Solution: Implement more regular performance reviews that have more focus on growth opportunities for employees. Align employee tasks with their job growth goals. (Side note – Career development is the #1 reason that employees leave their jobs.)

Keep in mind that there will be multiple solutions possible for just about any problem that is highlighted by your ESI scores.

You will know if your solution was effective or not by the scores obtained for the same question in the next ESI survey.

Building employee satisfaction means building employees up

Ensuring employee satisfaction is arguably the most important job of any manager. After all, you can’t build your employees up if you don’t know what issues need to be addressed.

This also takes quite a bit of effort to truly measure and understand, since there’s no one KPI  that tells you exactly how employees feel.

The data-backed approach to improving employee satisfaction, as we outlined here, involves:

  1. Designing an employee satisfaction index (ESI) survey.
  2. Asking employees to fill out the survey every 6 months to 2 years.
  3. Calculating the average and variance of each statement on the survey.
  4. Identifying areas where employees are not satisfied and implementing appropriate solutions.

When you’re ready to start making improvements, check out these proven strategies for motivating remote teams and increasing employee productivity. You should continue iterating through this process even after you have reached your employee satisfaction goals. It’s the only way to ensure employee satisfaction remains high.

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